Abstract
In the last two decades, many developments have been made in the field of strategic performance management in terms of performance management frameworks/models. The major developments are performance prism, Kanji’s business scorecard, holistic scorecard, system dynamics-based balanced scorecard, etc. One of the attempts made to propose an integrated performance management framework is named as flexible strategy game-card, which intends to support full cycle of strategy formulation, execution, performance measurement, and management. This chapter is an attempt to discuss about this evolving performance management framework in terms of its evolution, the theoretical roots, and application of framework by presenting an illustration. The outcome of the chapter is to share theoretical roots with the researchers and practitioners related to this recent development.
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Keywords
- Performance Management
- Stakeholder Theory
- Performance Measurement System
- Balance Scorecard
- Flexible Strategy
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
1 Introduction
The changes in the business environment demand changes in the systems or models being used by enterprises. Globalization, competition, and changing customer demands have made the lives of the enterprises tougher and forced them to look beyond annual reports and financial statements. In the last two decades, there is a notable interest related to research on performance measurement and management (Taticchi et al. 2010). There is plethora of performance management frameworks/models proposed and discussed by the researchers which deal different issues related to enterprise performance. Some major developments are performance measurement matrix, results and determinants framework, performance pyramid, balanced scorecard, performance prism, EFQM excellence award, Kanji’s business scorecard, system dynamics-based scorecard, proactive scorecard, performance management system framework, etc.
Some of these frameworks have been discussed at conceptual level, while some of them are used by practitioners as well. They have some major contributions to the world of knowledge base but at the same time suffer with some of the criticism. Sushil (2010) made an attempt to develop an integrated performance management framework and proposed flexible strategy Game-card, which intends to overcome some of the major shortcomings of existing frameworks.
The objective of the chapter is to describe about this evolving performance management framework in terms of its theoretical roots, the evolution of the framework, and application of this framework in general context as well.
The chapter is organized as follows: After introduction, next section highlights the emerging issues related to performance management systems. This is followed by, the limitations of existing performance management frameworks are discussed highlighting proposed solutions. Next section describes about the evolving performance management framework, i.e., flexible strategy Game-card. The theoretical roots of this framework are subsequently discussed. It further exhibits the application of Game-card in the context of Indian automobile manufacturing enterprises. The illustration is presented related to application of this framework. The chapter concludes with highlighting the limitations and future scope of the proposed framework.
2 Performance Management Systems: Emerging Issues
Before moving towards the issues in performance management, it is imperative to detail out the term strategic performance management, which can be defined as a performance management tool that translates strategy into a set of performance measures of a chosen strategy (Atkinson et al. 1997; Chenhall 2005). According to Dee Waal (2002), “strategic performance management is the process where steering of the organization takes place through the systematic definition of mission, strategy and objectives of the organization, making these measurable through critical success factors and key performance indicators, in order to be able to take corrective actions to keep the organization on track.”
Financial figures and annual reports cannot fully present the real picture of the performance of an enterprise, as these have the limitation to look the enterprise from strategic perspective. These are lagging indicators that are results of past decisions, and they are not concerned about the changing market demands and customer expectations (Ghalayini and Noble 1996). In the last two decades, many researchers have made contributions in terms of discussing diverse issues related to enterprise performance. Looking at pre-2000 developments, one of the dominant frameworks is balanced scorecard (BSC), giving due importance to nonfinancial performance parameters. Harvard Business Review has listed it as one of the 75th most influential ideas of twentieth century (Bible et al. 2006). Other developments have highlighted the issues as leading and lagging indicators (results and determinants framework), organizational hierarchy view (performance pyramid), increasing wealth of shareholders (shareholder value), bringing dynamics in performance measurement systems (dynamic performance measurement system), etc.
Changing business environment, business dynamics, and turbulent situation lead the practitioners and researchers to consider some other major emerging issues related to performance measurement and management (PMM). Some of the issues are as follows: incorporating all the stakeholders (performance prism), updates in scorecard approach (Kanji’s business scorecard, holistic scorecard, total performance scorecard, proactive balanced scorecard, etc.), integration of people development (dynamic multidimensional performance framework), etc. Taticchi et al. (2010) point out clearly that now it is “second generation of PMM research” where researchers are looking for developing effective PMM systems and incorporating methodologies and techniques to transform the information in value-making activities and integrate it with strategic objectives and business plans.
No doubt, these existing performance management frameworks have their own contribution(s) to the world of knowledge base, but there are many shortcomings related to these frameworks which need to be overcome to effectively execute these models/frameworks.
3 Existing Performance Management Frameworks: Limitations and Proposed Solutions
The literature review reveals that there is enormous work done related to PMM and strategic performance management frameworks. The Google Scholar search results related to keyword “strategic performance management frameworks” for the period 1990–2011 are around 16,200. For this study, some of the classical and well-cited works have been reviewed. The papers discussing the critics of these frameworks have also been reviewed. The major shortcomings as a whole related to performance management systems have been culled out that are summarized in Table 6.1.
Considering the above limitations, the literature has proposed some solutions that can help to develop effective performance management system for an enterprise; some of the proposed solutions are listed in Table 6.2.
4 Description of Flexible Strategy Game-card
Sushil (2010) has proposed an enterprise performance management framework intending to overcome above-mentioned limitations and named this framework as Game-card looking ahead of scorecard. The structural overview of this framework is exhibited in Fig. 6.1. Game-card looks the performance dominantly from two perspectives, i.e., enterprise perspective and customer perspective. All the internal and external stakeholders are considered under enterprise perspective, and as customers are the center point for any strategic decision, they are kept as an independent perspective.
Enterprise perspective deals with S-A-P-P framework (Situation-Actor-Process-Performance); here situation deals with external and internal situation factors, which lead to proactive and reactive measures of strategic decisions and actions. Some examples may be globalization, changing customer demands, government policies, etc. Actor-related factors deal with internal and external stakeholders who play a crucial role in strategy formulation as well as execution. Actor-related strategic factors may be customer satisfaction, employee productivity, training activities, etc. Process factors deal with internal and external business processes that are related to strategy execution. Process-related factors may be process innovation, new product development, etc. These three factors are leading factors, which help to drive for better performance results. Performance-related factors can be considered as lagging indicators consisting of both financial and nonfinancial performance. These measures may be market share, ROI (Return on Investment), number of subscribers, growth in revenues, etc.
Customer perspective considers the enterprise performance from the customer’s viewpoint. This is linked to value in offerings and value in relationships. Strategic factors related to value in offerings may be quality of services, product features/attributes, etc. Value in relationships may be depicted by factors as after sales services, brand image of enterprise, customer relationship services, etc.
Besides measuring the performance, this framework considers to manage the performance by supporting the full cycle of strategy formulation, execution, measurement, feedback, and corrective actions and thus leading to a dynamic performance management framework. The LAP (Learning-Action-Performance) framework gives it an edge over other performance management frameworks. It helps to make and review strategic interventions as required by getting the learning from performance measurement to get better performance outcome.
Thus, this evolving performance management framework intends to provide a dynamic, integrated, and holistic framework to enterprise and industry. It is imperative to discuss about the evolution of this evolving performance management framework. The evolution highlights the theoretical roots of this framework, which is described in the next section.
5 Theoretical Roots of Flexible Strategy Game-card
This evolving performance management framework has its strong theoretical roots which come from strategic management theories and some popular performance management frameworks. The theoretical roots are portrayed and exhibited in Fig. 6.2.
5.1 Integrative Perspective (Balanced Scorecard)
Balanced scorecard (BSC) (Kaplan and Norton 1992, 1996) is one of the most dominating performance management frameworks, which has brought revolution by integrating financial perspective with nonfinancial performance perspective. The integration of bringing financial and nonfinancial measures, short-term and long-term measures, and leading and lagging indicators together as an integrated framework has come from BSC. There are some criticisms of BSC highlighted in the literature; this framework makes an attempt to overcome them as highlighted above.
5.2 Stakeholder Perspective (Stakeholder Theory)
Stakeholders are the integral part of any enterprise. Freeman’s stakeholder theory (1984) addresses the issue of who and what are the stakeholders of any company and whom or what do the managers pay attention? The definition of a stakeholder given by Freeman says, “Any group or individual who can affect or is affected by the achievement of organization’s objectives” (1984, p. 46). The existing performance management frameworks highlighted the issue of inclusion of many stakeholders, but there is limited work incorporating all the stakeholders. This framework intends to cover all the major stakeholders under two perspectives dominantly, i.e., enterprise perspective and customer perspective. As customers are at the center for making any strategic decision, they are taken as independent perspective. Enterprise perspective incorporates all the major internal and external actors related to enterprise. Thus, this framework follows the stakeholder theory and incorporates almost all of the relevant stakeholders.
5.3 Duality Perspective (Flowing Stream Strategy Crystal)
Flowing stream strategy crystal brings the confluence of continuity and change by dealing with these opposite forces effectively (Sushil 2012). The crystal balances the continuity and change forces for an enterprise with balancing the enterprise and customer strategic factors. For an enterprise, continuity and change forces present current reality, whereas customer and enterprise factors depict the decomposition of strategy. Bhat et al. (2011) had used this framework to analyze the complex dynamic of innovation in Moser Baer Industries Ltd. (MBIL), one of the world’s largest manufacturers of optical storage media. Graetz and Smith (2009) and Nasim and Sushil (2011) had also highlighted the importance of managing the balance between continuity and change forces. This evolving performance management framework adapts the dual perspective of performance and proposes a holistic view of performance by “V” model of strategic performance management, which is shown in Fig. 6.3.
5.4 Operational Framework (SAP-LAP Framework)
In the competitive scenario, the enterprise performance management framework should be dynamic, which can be updated as per the changes in the external environment. Situation plays an important part in strategic decision and performance. The operational aspects of flexible strategy Game-card are derived from SAP-LAP (Situation-Actor-Process Learning-Action-Performance) framework, which is a popular framework used for analyzing and synthesizing any case context (Sushil 1997, 2000, 2001).
Situation-Actor-Process parameters are the leading indicators of performance. The performance can be treated as a lagging indicator. These aspects have been taken from SAP-LAP as the interplay of situation, actor, and process helps to analyze the context related to business and better interplay leads to better results which can be measured by performance measures or KRAs (key result areas).
6 Application of Flexible Strategy Game-card: An Illustration
For developing a better understanding of this framework, it is imperative to illustrate the application of this framework in a general context. Here, an illustration has been presented in the context of Indian automobile manufacturing enterprises. Strategic factors related to performance have been identified for two perspectives, i.e., enterprise perspective and customer perspective.
To capture context-specific strategic factors, semi-structured interviews have been conducted with the top management of automobile firms and with the customers as well. The data of these interviews have been analyzed to cull out the factors for four dimensions of enterprise perspective and two dimensions of customer perspective. Strategic factors for enterprise perspective and customer perspective have been showcased in Tables 6.3 and 6.4, respectively.
This illustration showcases that financial performance factors are the lagging indicators of performance, which can be achieved by properly responding and strategizing for leading indicators. One of the unique features of the framework is capturing the customers’ viewpoint related to performance of enterprise, which highlights that customers are expecting to get lifetime value for the products and services, and their feedback should be taken care of by the enterprises.
7 Conclusion
This chapter can be considered as a conceptual one highlighting the conceptualization of flexible strategy Game-card through discussion of its evolution and theoretical roots. Some issues identified in this chapter can be summarized in the following points:
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Strategy Game-card incorporates situation factors as its operational aspect which highlights the dynamism of the framework.
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The framework highlights the importance of stakeholders for any enterprise which have a crucial impact on the performance of the firm. The most important stakeholder, i.e., customer, is represented as most of the performance management frameworks as customer satisfaction index and customer retention. There is a need to relook this aspect in an explicit manner by highlighting customer relationships and customer offerings as a central focus of strategy, and this attempt has been made by strategy Game-card.
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Strategy Game-card highlights the need to think beyond scorecard and attempts to support the whole cycle of strategy formulation and execution, thus helps to bring a Game-card both for playing the strategy game and for scoring the performance in the game.
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Strategy Game-card can work as a powerful tool for developing strategic performance management framework for any enterprise, a sector or the industry as a whole.
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This framework may be helpful to move one step ahead in terms of performance management for the enterprise by not only monitoring and controlling the performance but also formulating, executing, and making corrective actions in the strategies for better performance results.
This chapter contributes to knowledge base by reporting and discussing this recent development and highlights that the evolution is deeply rooted in classical concepts and theories of strategic management combining the dynamism and integration to be effectively utilized in turbulent and dynamic business environment.
The methodology for development of flexible strategy Game-card has been proposed in the literature (Sushil 2011) which can be adopted for development of flexible strategy Game-card for any enterprise of choice. The mechanism highlights that there should be feedback from existing performance results and new strategic interventions or some corrective actions can be taken to get the desired performance outcome. Thus, the dynamics of the framework provides it an edge over existing performance management frameworks/systems. Integration of flexible strategy Game-card with “system dynamics” methodology can help to explore the performance results for the future scenarios, and on the basis of future results, the corrective actions in strategies can be taken to get desired performance results (Yadav et al. 2012). Now, the field of performance measurement and management has not restricted to management control, but widened towards dynamic business performance systems which lead to execute effectively in current business environment.
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Yadav, N., Sushil (2014). Theoretical Roots of Flexible Strategy Game-card: An Evolving Strategic Performance Management Framework. In: Sushil, Stohr, E.A. (eds) The Flexible Enterprise. Flexible Systems Management. Springer, New Delhi. https://doi.org/10.1007/978-81-322-1560-8_6
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